A false dawn - why are China's A shares perking up?

Is an underground fund management business in league with crooked analysts and executives?

China's A-share market has jumped back from its lows, but has this been because of improved fundamentals or the result of a harmful investor mentality fostered by a misallocation of capital by the country's huge underground funds industry

At the end of 2001, the People's Bank of China estimated the underground fund management business to stand at RMB 700 billion $84 billion, over ten times the size held in the official funds, and around 40% of the entire market.

The underground funds, run by former staff at the official fund companies and securities houses, have attracted capital from ultra-rich individuals as well as companies and banks. The underground funds are far more flexible in...

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